In Spain, the purchase and sale of real estate, as well as corporate transactions such as the dissolution of entities, are taxed through the transfer tax and stamp duty (ITPAJD), in which the Autonomous Communities will collect the appropriate amount for these common transactions.
Other transactions involving the transfer of assets are subject to the corresponding tax form, although in some cases they are exempt (capital increases, incorporation of companies or private loan contracts, among others) or not subject to the tax.
The most common capital transfers are the sale and purchase of homes or second-hand cars. In both cases, taxpayers will be obliged to pay transfer tax (TPO), so it is essential to be familiar with this tax.
What are transfers of assets?
Transfers of assets are those operations that consist of an exchange of assets between two individuals or legal entities.
In these cases, the transfer tax (ITPAJD), a tax levied on these transactions carried out within the territory of Spain, must be paid.
Transfer tax and stamp duty (Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados)
What is transfer tax?
The transfer tax or ITP (in its modality of TPO) is a tax levied on the transfer of property for valuable consideration that takes place within Spanish territory.
However, the taxpayer does not have to pay transfer tax when the sale and purchase transaction is already subject to VAT (for example, in the case of the sale and purchase of a newly built property). In this way, double taxation is avoided, i.e. the same transaction is not subject to two different taxes.
Who is obliged to pay transfer tax?
The taxpayer who is legally obliged to pay transfer tax is the individual or legal entity whose assets are increased after the sale transaction, i.e. the “beneficiary” of the transaction.
In the case of the sale of real estate, it is the purchaser of the property who is obliged to pay the corresponding transfer tax (TPO).
In Catalonia, the general tax rate for the sale and purchase of real estate is set at 10% (11% from 1,000,000 euros in value of the property), although there is a reduced rate of 5% when the property is the buyer’s first habitual residence and the income and age requirements of the buyer are met as established in the regulations.
To calculate what is to be paid to the tax authorities as ITP, a tax rate has to be applied to the resulting taxable base. To do this, the tax base has to be determined. The taxable base refers to the actual value of the property or right that is the object of the transfer of property.
Once the tax base has been calculated, the tax rate set by each Autonomous Community must be applied, since this is an element of the tax that the Autonomous Communities can regulate.
However, a subsidiary tax rate is provided for if the Autonomous Community has not set another tax rate.
In Catalonia, in addition to the general tax rate of 10%, the following special tax rates are provided: 7% for social housing; 5% for transfers of movable assets such as vehicles; 4% for administrative concessions; and 1% for the constitution of real security rights such as a pension or a guarantee. In the case of the dissolution of entities, which is subject to the ITPAJD tax (modality OS), the tax rate is 1%, which is applied to the liquidation quota of the company.
When does the taxpayer have to pay ITP to the Inland Revenue and how is payment made?
The taxpayer, about the payment of ITP, should bear in mind that the tax becomes due at the moment when the transaction subject to taxation takes place (when the acting subject to taxation is formalised, in general, the corresponding public deed; or if there is no deed when the contract or private document is formalised). Thus, the taxpayer must pay the transfer tax (in the case of an event of taxation and not exemption) within one month (counted from date to date) from the time of accrual.
To file and pay the transfer tax, in general, it can be done with the help programmes that the Autonomous Communities have set up for this purpose, using a digital certificate, although in some cases it is possible to file on paper at the corresponding Tax Office.
In what situations can you encounter an ITP?
The ITPAJD applies, among others, to the following transactions:
- Onerous transfer of immovable property.
- Onerous transfer of a movable or immovable asset.
- Onerous transfer of rights.
- Corporate transactions such as incorporation, increase or decrease of share capital.
In short, property transfers are taxed in Spain (provided that they are not subject to another tax, such as VAT). In these cases, the taxpayer will have to pay the corresponding amount of transfer tax to the Treasury.
This is why it is essential to know the ins and outs of this tax, especially if we take into account that this type of transaction is very common in Spain. If you have any questions on this subject, please contact our tax advisors in Barcelona.